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C O N F I D E N T I A L SECTION 01 OF 03 LISBON 000066
NOFORN
SIPDIS
TREASURY FOR OFAC
DEPT FOR IO/PSC AND EEB/ESC
DEPT ALSO FOR NEA/IR
E.O. 12958: DECL: 02/11/2020
TAGS: PINRECONEFINEUNPGOVPRELIRPO
SUBJECT: PORTUGAL: ACTION REQUEST FOR GUIDANCE ON PROPOSAL
TO ESTABLISH BANKING RELATIONSHIP WITH IRAN
REF: A. LISBON 52
¶B. 09 LISBON 146
Classified By: XXXXXXXXXXXX for reasons 1.4(b,d).
¶1. (U) This is an action request. See para 12.
¶2. (C/NF) Summary: In April 2009, officials of Millennium
BCP, Portugal's leading private bank, visited Iran at the
invitation of the Iranian Embassy in Lisbon and met with the
Central Bank and other entities in the financial sector to
discuss Iran's interest in establishing a business
relationship with Millennium. On February 5, Millennium
Executive Board Chairman Carlos Santos Ferreira discussed the
proposal with Poleconoff and its possible benefit to the USG.
While he claimed that the costs could outweigh the benefits
to Millennium, Ferreira is willing to establish a
relationship with Iran to help the USG track Iranian assets
and financial activities. Millennium has consulted with the
Bank of Portugal and senior government officials, and would
like our views on its proposed relationship with Iran and
Washington's interest in tracking Iranian accounts in
Portugal. We request Washington guidance; our recommendation
is that Millennium not pursue the relationship. However,
given that Ferreira may do so regardless of USG
recommendations, it might be prudent to maintain open
channels of communication with Ferreira. Post will track
developments and discourage deeper relations with Iran. (See
para 12.) End Summary.
¶3. (C/NF) On February 5, Poleconoff met with Carlos Santos
Ferreira, Chairman of the Executive Board of Millennium BCP
(formerly the Portuguese Commercial Bank), at the request of
Ferreira's advisor who is a longtime contact of the Embassy.
Ferreira discussed a proposal by the Iranian banking sector
to establish a relationship with Millennium to further trade
and commercial opportunities. He noted that Iran has other
options in Europe but may be interested in Portugal for its
less restrictive regulatory environment. (Iran already has
relations with various European banks, including HSBC,
Deutsche Bank, Danske, and Banque Commercial de Placement.)
Ferreira insisted that while the costs of the Iranian
proposal could outweigh the benefits to Millennium, the bank
would be open to establishing a relationship with Iran in
order to help the USG track the financial activities of the
Iranian government.
¶4. (C/NF) Early last year, the Iranian Embassy in Lisbon
contacted Ferreira, who had previous contact with that
embassy while serving as Chairman of the Board of Directors
of Oeiras Foundation (1987-1989), a state entity that he says
sold munitions to Iran more than 20 years ago. Millennium
Bank advised Prime Minister Socrates and senior government
officials, including the governor of the Bank of Portugal
(Portugal's central bank), of Iran's interest in establishing
a relationship with Millennium and having Millennium
officials visit Iran for meetings.
¶5. (C/NF) In April 2009, a few weeks after Portuguese MFA
Political Director Nuno Brito was in Tehran (Ref B), two
Millennium officials -- Jose Joao Guilherme, member of the
Executive Board of Directors who is responsible for the
bank's international portfolio, and Duarte Pitta Ferraz, Head
of the International Affairs Unit -- visited Iran for five
days at the invitation of the Iranian Embassy in Lisbon.
They met with senior representatives of the Central Bank,
seven banks (including three private banks), the Organization
for Investment, Economic, and Technical Assistance of Iran
(OIETAI), and the Portuguese Embassy to discuss EU
restrictions on Iran and potential business opportunities
within those constraints. The banks expressed interest in
establishing relations with Millennium in the traditional
areas of trade and finance.
¶6. (C/NF) Based on the meetings and information provided by
officials of the Iranian Central Bank and the Iranian
Ministry of Finance and Economic Affairs, Millennium selected
four priority banks for further consideration: the Export
Development Bank of Iran (EDBI), Bank Tejarat, Bank Parsian,
and EN Bank, which have SWIFT codes. The EU is currently
restricted by UN sanctions from doing business with Melli
Iran Bank and Saderat Iran Bank. According to Millennium
officials, no other Iranian bank is subject to UN sanctions.
LISBON 00000066 002 OF 003
In 2008 Iranian deposits in European banks totaled USD 46.7
billion, while foreign deposits in Iran decreased by USD 2.5
billion. France maintained a significant account, with USD
5.4 billion in Iranian banks. Iranian exports totaled USD
106 billion (80 percent from oil), while imports totaled U=H.QAfrica, and the Middle East.
According to the report, EDBI told Millennium officials that
Brazil is not overly concerned about respecting international
sanctions since "independent countries can make independent
decisions." (PROTECT)
¶8. (C/NF) Portugal has very few Iranian residents and very
little trade with Iran. Portugal's trade with Iran totals
less than 40 million euros per year, while Iranian oil
represents about 9 percent of Portugal's oil imports. In
January 2010, Brito told Under Secretary of State Burns that
Portugal had no intention of furthering its economic
relationship with Iran at this time. However, Portugal is
keeping its options open for future investments (Ref A).
¶9. (C/NF) Millennium anticipates engaging in the following
activities, which Ferreira insists are in compliance with EU
banking laws and regulations and UN sanctions, if it were to
agree to establish a relationsh/MQQ7#^QQQare not currently on any sanctions list and
in accordance with the condition above; (3) undertake
transactions on behalf of Iranian credit institutions with
additional monitoring and oversight mechanisms to prevent
money laundering and terrorism finance; and (4) continue to
conduct, on a case-by-case basis, operations of support to
client companies that export to Iran.
¶10. (U) Millennium BCP is Portugal's leading private
financial group and among the top 100 in the world, with
listings on more than 40 national and international stock
markets. It ranks second in Portugal in terms of market
share, credit, and client assets. (As of December 2008, it
had 2.6 million clients and an estimated 22 percent market
share.) Founded in 1985 as the Portuguese Commercial Bank,
it now boasts the largest presence in Portugal with 918
branches nationwide. It also has branches in the U.S.,
Europe and Africa, including Poland, Greece, Mozambique,
Angola, Romania, Switzerland, and Turkey. The Embassy has
been a Millennium client since 1997. Despite the financial
crisis and the weak Portuguese economy, the bank reported a
201 million euro profit in 2008. On February 10, it reported
a 12-percent increase in net profit in 2009, with 225 million
euros, helped by the sale of a nearly 50 percent stake in its
Angolan subsidiary. The GOP's state-run Caixa Geral de
Depositos has a small stake (2.5 percent as of June 2009) in
Millennium. A suspended member of the Millennium Executive
Board of Directors is under investigation, along with other
Portuguese political and business figures, for allegations of
corruption and influence peddling in a private business deal,
which does not involve the bank.
¶11. (U) Carlos Ferreira, Chairman of the Executive Board of
Directors of Millennium since January 2008, has extensive
experience in the banking industry. Previously, he served as
Chairman of the Board of Caixa Geral de Depositos, Chairman
of Caixa - Banco de Investimento, Chairman of Caixa Seguros,
and Member of the Board of the Steering and Strategy
Committee of Foment Invest, among other positions. He also
served as Member of Parliament for the Socialist Party and
Vice Chairman of the Parliamentary Committee on Security and
Health (1976-1977), member of the management board of
state-owned Airports and Aerial Navigation (ANA), member of
the Tax Reform Commission, and Chairman of the Board of
Directors of the Macau Airport Company. Born in Lisbon in
1949, Ferreira earned a law degree in 1971 from the Faculty
of Law of Classical University of Lisbon and subsequently
taught at his alma mater, as well as at the Faculty of Law at
Portugal's Catholic University and the Faculty of Economics
LISBON 00000066 003 OF 003
at the New University of Lisbon (1977-1988). He is a close
contact of the Embassy and an influential member of the
Portuguese banking sector. His son will soon be moving to
New York to work for Deloitte Touche.
¶12. (C/NF) POST RECOMMENDATION/GUIDANCE REQUEST: Ferreira
told us he would be willing to allow the USG to monitor the
Iranian accounts in Millennium in a manner to be mutually
agreed upon, and he seeks our views on such an arrangement.
Post recommendation is that our basic response to Ferreira be
that Millennium not pursue any relationship with any Iranian
entities. However, it is quite possible that Millennium will
pursue the relationship regardless of USG recommendations.
Therefore, post recommends that we maintain open channels of
communication with Ferreira in order to maintain some
visibility on the Iranian accounts should Millennium go ahead
and set them up. Post requests Washington guidance in
responding to Ferreira's proposal, as well as views on
Millennium's proposed relationship with Iran. While Ferreira
did not explicitly say so, post believes that the Portuguese
MFA is, at a minimum, aware of his approach to the Embassy.
Ferreira is open to further communication with post should
Washington need more information. Embassy ORA has cleared
this cable.
For more reporting from Embassy Lisbon and information about Portugal,
please see our Intelink site:
http://www.intelink.sgov.gov/wiki/portal:port ugal
BALLARD